The Financial Reporting Council updated its U.K. Corporate Governance Code to improve relationships among companies and stakeholders.
The FRC said its new shorter, sharper code emphasizes that businesses should build trust by forging strong relationships with key stakeholders. The FRC also reiterated it wants to see clear, meaningful reporting from companies. "Investors and proxy advisers must assess explanations carefully and not take a tick-box approach," said an FRC statement accompanying the revised code.
Among the changes are a new provision to enable greater engagement between the company board and the workforce, in order to understand one another's views. Regarding company culture, boards are now asked to create a culture that aligns company values with strategy, and they are also asked to assess how they preserve value long-term.
A further change relates to succession and diversity, with boards required to ensure they have the right mix of skills and experience, are challenging the company in a "constructive" way,and also promote diversity. The new version of the code emphasizes the need for boards to be "refreshed" and to undertake succession planning.
The last of the main changes relates to remuneration. The FRC statement said that, in order to address public concern over executive pay, the new code emphasizes remuneration committees should take workforce pay and related policies into account when setting director remuneration. "Remuneration schemes and policies should enable the use of discretion to override formulaic outcomes. They should also include provisions that would enable the company to recover and/or withhold sums or share awards and specify the circumstances in which it would be appropriate to do so," said the revised code.